NCCLS Document GP6-A

February 1994 Vol. 14 No. 3

Inventory Control Systems for Laboratory

Supplies; Approved Guideline

This document contains recommendations for inventory control systems to insure the availability of
reagents and supplies in the laboratory.

ABC
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 February 1994 GP6-A

Inventory Control Systems for Laboratory

Supplies; Approved Guideline
Abstract

Inventory Control Systems for Laboratory Supplies; Approved Guideline (NCCLS document GP6-A) is
intended to address the needs of the clinical laboratory as they relate to the availability of reagents and
supplies on an uninterrupted basis. This guideline reviews various types of systems, terminology, and
recommendations for establishing or updating an inventory control system. The basic concepts apply to
both a manual and automated system. Sample forms are provided for internal use.

[National Committee for Clinical Laboratory Standards. Inventory Control Systems for Laboratory
Supplies; Approved Guideline. NCCLS document GP6-A (ISBN 1-56238-228-4). NCCLS, 771 East
Lancaster Avenue, Villanova, Pennsylvania 19085, 1994.]

NCCLS VOL. 14 NO. 3 i

 NCCLS Document GP6-A
ISBN 1-56238-228-4
February 1994 ISSN 0273-3099

Inventory Control Systems for Laboratory

Supplies; Approved Guideline

VOLUME 14 NUMBER 3

Robert E. Wenk, M.D.

Nancy A. Bristol, M.T.(ASCP)
George McGeeney
John Winter-Hallman, M.T.(ASCP)

ABC
 February 1994 GP6-A

Copyright
© 1994. The National Committee for Clinical Laboratory Standards.
Portions of this document may be excerpted or reproduced for use in educational programs, for inclusion in
laboratory procedure manuals, or for interlibrary loan. NCCLS requests that multiple copies prepared for
educational programs or other authorized uses include the following statement:

From NCCLS publication GP6-A, Inventory Control Systems for Laboratory Supplies; Approved
Guideline. Copies of the current edition may be obtained from NCCLS, 771 East Lancaster Avenue,
Villanova, Pennsylvania 19085.

Permission to reproduce or otherwise use the text of this document to an extent that exceeds the exemptions
granted here or under the Copyright Law must be obtained from NCCLS by written request.

Suggested Citation

National Committee for Clinical Laboratory Standards. Inventory Control Systems for Laboratory Supplies;
Approved Guideline. NCCLS document GP6-A (ISBN 1-56238-228-4). NCCLS, 771 East Lancaster Avenue,
Villanova, Pennsylvania 19085, 1994.

Proposed Guideline
June 1993

Approved Guideline

Approved by Board of Directors

September 1993

Approved by Membership
December 1993

Published
February 1994

ISBN 1-56238-228-4
ISSN 0273-3099

NCCLS VOL. 14 NO. 3 iv

 February 1994 GP6-A

TABLE OF CONTENTS
PAGE

ABSTRACT ................................................... i

COMMITTEE MEMBERSHIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii

FOREWORD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix

1.0 INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

2.0 SCOPE .................................................. 1

2.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

3.0 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

3.1 Basic Function Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

4.0 GENERAL SYSTEM AND FLOWCHART ................................ 4

5.0 SUPPLY ANALYSIS AND IDENTIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

5.1 Laboratory Section Lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

5.2 Item Identification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.3 Product Demographics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

6.0 MONITORING INVENTORY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

6.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.2 Optimal Frequency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6.3 Specific Operating Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

7.0 CONTROLLING INVENTORY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

7.1 Usage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7.2 Handling/Storage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.3 Inventory Recording . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

8.0 ORDERING SUPPLIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

8.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.2 Specifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.3 Ordering Formats . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

9.0 INVENTORY EFFECTIVENESS REVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

9.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
9.2 Additional Checks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

10.0 SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

BIBLIOGRAPHY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

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TABLE OF CONTENTS (Continued)

APPENDIX A: Basic Analysis of Items Used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

APPENDIX B: Traveling Purchase Requisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
APPENDIX C: Stock Inventory Record . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
APPENDIX D: Perpetual Inventory Record . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
APPENDIX E: Instrument Parts Inventory Record . . . . . . . . . . . . . . . . . . . . . . . . . . 27

SUMMARY OF COMMENTS AND SUBCOMMITTEE RESPONSES . . . . . . . . . . . . . . . 29

RELATED NCCLS PUBLICATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

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AREA COMMITTEE ON GENERAL LABORATORY PRACTICES

Gerald A. Hoeltge, M.D. The Cleveland Clinic Foundation

Chairholder Cleveland, Ohio

SUBCOMMITTEE ON INVENTORY CONTROL

Robert E. Wenk, M.D. Sinai Hospital

Chairholder Baltimore, Maryland

Nancy A. Bristol, M.T.(ASCP) Crozer-Chester Medical Center

Chester, Pennsylvania

George McGeeney Pharmacia-ENI, Inc.

Columbia, Maryland

John Winter-Hallman, M.T.(ASCP) Grand View Hospital

Sellersville, Pennsylvania

ADVISORS

Christine M. Roby University Hospital

Boston, Massachusetts

A. Samuel Koenig, III, M.D.,FCAP Family Medical Care

Board Liaison Fort Smith, Arkansas

Denise M. Lynch, M.T.(ASCP), M.S. NCCLS

Staff Liaison Villanova, Pennsylvania

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 February 1994 GP6-A

FOREWORD

Efficient and cost-effective clinical laboratory operations require the uninterrupted availability of reagents
and supplies. The inability to perform a test because of lack of reagents or supplies is costly, disruptive,
wasteful, and might extend hospital stays, postpone surgery, or interfere with patient care.

The clinical laboratory is primarily responsible for identifying needed products and suggesting potential
suppliers. Initially, this endeavor includes the establishment and fostering of a good working relationship
with the manufacturers and suppliers of needed products. Subsequently, the laboratory must establish an
internal inventory control system to assure the maintenance of adequate supplies.

An inventory control action plan facilitates close communication between the laboratory, hospital
purchasing system, and industry. Any plan adopted must emphasize maximum efficiency. Carefully
prepared procedures, appropriate decisions on ordering of supplies, and continued emphasis on control of
expenses are the basic characteristics of good management required to satisfy those who audit the entire
system, including the purchasing, receiving, and accounts payable departments.

This guideline reviews various types of systems and terminology and provides numerous specific
suggestions worth considering when establishing an inventory system or when improving an existing
system. Many of these apply even if an automated system is in place, and the subcommittee
recommends that automated inventory systems be considered as a basic program objective. We
recommend reviewing the entire document, including the appendices. A number of forms are
recommended with examples, as well as blank copies for those who may wish to have copies reproduced
by their local printer.

The summary lists basic steps to follow in implementing the general recommendations of the committee.
The system should be modified according to laboratory requirements, as well as efficiency requirements
imposed by external departments.

The control of blood component inventories is not addressed in this document.

KEY WORDS

Inventory control, purchasing, supplier, receiving, accounts payable, materials management, supply
requisitioning, blanket orders, standing orders, backorders, confirming order, traveling purchase
requisition, inventory levels, safety stock, order point, expiration dating, storage.

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 February 1994 GP6-A

INVENTORY CONTROL SYSTEMS FOR LABORATORY SUPPLIES; APPROVED GUIDELINE

1.0 INTRODUCTION

To maintain its ability to function efficiently and provide uninterrupted data that contribute to
patient care, a clinical laboratory must have on hand an adequate quantity of supplies. A
consumer survey by NCCLS showed that 47% of users experienced a stock-out at least once a
month. Weekly stock-outs were noted by 13% of those who replied. In the same survey, 52%
of the stock-outs were attributed to vendor backorders. The laboratories themselves accepted
responsibility for the remaining 48% of stock-outs for reasons including failure to order promptly,
inappropriate stock levels for average use, and other laboratory-based reasons. There is a need to
establish better consumer buying practices and an improved capability to respond to inventory
shortages.

2.0 SCOPE

2.1 General

Acquiring supplies and controlling the inventory may be an operations function that occurs
totally within the clinical laboratory. However, external departments are always involved,
at least to the extent of receiving incoming shipments, transferring goods to the
laboratory, and in payment through accounts payable. Staff members within the clinical
laboratory must recognize their finite roles and establish clearly defined procedures to be
implemented by well-trained personnel. Careful attention to the entire process is essential
so that the system works smoothly and does not burden the laboratory or external
departments.

Generally, the laboratory is responsible for specifications, as well as storage and use of
products. Most often, communication with the vendor is required, especially concerning
product improvements, method changes, and similar information that affects the test
procedure or quality control. The clinical laboratory must accept the responsibility for
these functions and provide accurate records to allow traceability for overall audit
purposes.

As a first step, each department head/supervisor should prepare a rough draft listing the
products used and how frequently they need to be ordered (see Appendix A). Specific
information should include the name of the product, catalog number, package
configuration, average monthly usage (AMU), unit of measure (U/M), normal lead time for
delivery, and storage area or single site use. Shipping frequency should be listed or
minimum inventory should be stated to serve as a cue for delivery authorizations. It is
useful to know shipping costs, as well.

Unless the supply system is thoroughly understood and operating smoothly, panic
situations occur because of shortage or overstocking. Obsolescence is also a strong
possibility if expiration dates are imminent or if improved technology changes the needs of
the laboratory.

Routine orders and standing orders should be reviewed every 6 months, at a minimum, to
ensure the requirements, vendors, and pricing are acceptable and correct. Vendor
representatives should be able to assist the laboratory in determining what standing order
levels can and should be, and they may be able to help in monitoring the process. This is
a good way to ensure that the vendor's representative is not contributing to any
overstock.

An inflation factor for budgeting appears warranted. It is important that managers and
supervisors verify that pricing changes are factored into the laboratory budget. Involving

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 February 1994 GP6-A

major vendors in the process will help determine the likelihood of pricing changes in the
upcoming fiscal year.

2.2 Objectives

The following basic objectives serve to plan a course of action.

(1) Simplify paperwork. Avoid duplication of effort in requisitioning and preparing

purchase orders.

(2) Reduce costly inventory. Develop timely ordering and standardization.

(3) Improve communications. Use systems to facilitate rapid and clear interactions
among, purchasing, receiving, accounts payable, material suppliers, and the
laboratory.

(4) Avoid costly emergency deliveries.

(5) Improve methods of budget preparation.

(6) Reduce prices paid for laboratory products and services.

(7) Educate laboratory personnel in inventory control (materials management)

procedures to enhance their management skills.

(8) To reduce labor of inventory management, centralize control and automate.

(Consider computers, bar coding, stockless and consignment systems, and group
purchases.)

3.0 DEFINITIONS

For purposes of this guideline, the following terms have been defined as they apply to the clinical
laboratory in a general hospital. Many of the suggestions may also apply to a clinical laboratory
in a medical group practice, a medical school, an independent clinical laboratory, a reference
laboratory, or even industry.

3.1 Basic Function Definitions

3.1.1 Purchasing

The department or person authorized to purchase goods and services for the
laboratory.

3.1.2 Supplier/Vendor

That person or entity for whom the purchase requisition for goods or services is
directly intended, e.g., distributors and manufacturers.

3.1.3 Receiving

The department that handles the physical receipt of material; the inspection of the
shipment for conformance with the purchase order (quantity and damage);
identification of and delivery to laboratory destination; and the preparation of
receiving reports.

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3.1.4 Accounts Payable

The accounting function of comparing the receiving record with the purchase
order to ensure that the information agrees prior to payment of the supplier.

3.1.5 Materials Management

The function that is responsible for knowing the unit cost of supplies, the logistics
to support receiving, distribution, and disposal of materials.

3.1.6 Inventory Records

The management tools used to set up specifications, adjust to varying usage, and
provide a smooth flow of supplies and audit records. These may include but are
not limited to traveling purchase requisitions, periodic count records, perpetual
inventory records, and specialized inventory records. (See examples in the
appendices.)

3.1.7 Supply Requisitioning

This function involves recommending when to order and the quantity to order
(based on usage, delivery time, quantity, packaging, available storage space, and
similar factors). Because supply requisitioning is one of the most sensitive parts
of the inventory management process, training and good judgement are required.
To ensure that there is a mutual understanding of expectations, any change to
orders, shipping dates, or pricing should be clarified between the laboratory and
the vendor before the order is placed.

3.1.8 Purchase Orders

The official record sent to the supplier to authorize shipping and billing. To ensure
that there is a mutual understanding of expectations, any change to orders,
shipping dates, or pricing should be clarified between the laboratory and the
vendor before the order is placed.

3.1.9 Blanket Orders

A long-term (e.g., 6 months) commitment to a supplier to ship based on delivery

authorizations specifying delivery, often over a short period such as 15 to 30
days. This procedure is especially useful for shortdated products.

3.1.10 Standing Order (Ordinary)

An order with a vendor to deliver a specific quantity at stated intervals. Because

changes in usage may increase or decrease needs, inventory should be reviewed
periodically (e.g., every 3 months) to keep standing order quantity in balance with
needs. At least 30 days notice should be given to the vendor when a standing
order is changed.

3.1.11 Standing Order (Protected)

An order that covers a specific lot number to be delivered over a long period of
time, in which case the vendor sequesters inventory for a specific customer.
Some vendors also protect the inventory designated for customers with standing
orders by declaring an item out of stock for other customers for an agreed time

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interval, usually 60 days. Such arrangements with a supplier may require a price
adjustment for inventory carrying costs.

3.1.12 Backorder

An unfilled customer order or commitment that places an immediate demand

against an item which has inventory insufficient to immediately satisfy the
demand.

3.1.13 Confirming Order

A purchase order issued to a vendor, listing the goods or services and terms of a
verbal order or written order before issuing the usual purchase document.

3.1.14 Delivery Schedule

The required or agreed time or rate of delivery of goods or services purchased for a
future period.

3.1.15 Order Preparation Lead Time

The time needed to analyze requirements and open order status (if any) and to
create and release a purchase requisition or a work order.

4.0 GENERAL SYSTEMS AND FLOWCHART

A flowchart can be a useful tool in analyzing and establishing an inventory control system. A
flowchart for a generic inventory control system is shown on the following page. The flowchart
has been divided into separate phases of inventory control, including Inventory Planning (I),
Systems Development (II), Procurement (III), and Management (IV). In addition, specific sections
of this guideline are referenced on the flowchart to various elements of this general inventory
control system.

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 Inventory Control: Flow Analysis

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 February 1994 GP6-A

5.0 SUPPLY ANALYSIS AND IDENTIFICATION

5.1 Laboratory Section Lists

Development of a classification and list of products used by the clinical laboratory,

preferably by section (i.e., Chemistry, Cytology, Hematology, Histology, Immunology,
Microbiology and Radioimmunoassay), is the first step in addressing any inventory
problem.

5.1.1 Basic Analysis

Begin with a basic analysis of items used (see Appendix A). Use the form to list
not only the products used by the section but also to indicate the following
pertinent information:

(1) complete description of the item;

(2) unit of count;

(3) approximate (average) usage per month (variances may be useful);

(4) priority level: high, medium, low;

(5) order lead time/delivery time;

(6) where stored and conditions of storage;

(7) comments such as supplier/catalog number.

5.1.2 Demographic Information

The form may be expanded to include most of the product demographic

information. The additional information is not needed for the basic analysis. It
would, however, expedite the development process in future steps. As a
minimum, include the specifications of the product in 5.1.1 and the following
specifications:

(1) standard packaging and alternative configurations, if available and known;

(2) part number or manufacturer's number;

(3) vendor (alternative vendors should be listed if available) and notations of

when no substitutions are permissible;

(4) shipping costs (important for determining budget allocations) because

some materials (e.g., RIA test kits) are expensive to ship.

5.2 Item Identification

5.2.1 Department Forms

As the forms are completed by each of the sections in the laboratory, verify the
products listed and list them alphabetically for each section.

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5.2.2 Form Review

Because one product might serve several sections, review and analyze the lists
from all laboratory sections to identify duplicate or similar items.

5.2.3 Inventory Monitoring

Assign responsibility for monitoring the inventory in each of the storage areas (i.e.,
hospital storeroom, laboratory storeroom, section storage areas, and special
storage areas for flammable supplies or refrigerated supplies).

Different inventory control procedures may be needed for the various storage
areas. Traveling purchase requisitions (Appendix B) may be convenient for
ordering and for special storage areas such as corrosive, flammable, or refrigerated
products not kept in individual section storage areas. Weekly physical count
records (Appendix C) or perpetual inventory records (Appendix D) may be used for
both hospital and laboratory storeroom products. A traveling requisition system
and a perpetual or a weekly count inventory record are needed for section storage
areas supervised by a section supervisor. The specific steps are explained in the
following sections.

5.3 Product Demographics

5.3.1 Product Listing

After all products are listed by laboratory section and storage area, obtain the
demographic information for each product. (As mentioned in 5.1.1, much of the
product description can be recorded at the same time the product lists are
generated.)

5.3.2 Minimum Information

As a minimum, obtain the following demographic information for the product:

(1) complete description;

(2) standard packaging and alternative configurations, if available and known;

(3) part number or manufacturer's number;

(4) vendor (alternative vendors should be listed if available);

(5) price breaks (i.e., standing order);

(6) unit cost;

(7) all special ordering instructions (i.e., required delivery schedule and
deadline for receipt; need for product to be all one lot number; need for
product to have long shelf life).

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6.0 MONITORING INVENTORY

6.1 General

To ensure the efficient, uninterrupted, and economical operation of a clinical laboratory the
following factors are evaluated:

6.1.1 Requirements

Requirements are demands on a unit/time basis that depend on historical (past)

and projected usage data. The rate of use can be determined by checking
purchase records over a 6-to-12-month period and by reviewing specific laboratory
test volumes. Measure the average amount of stock to be maintained against a
30-day period.

6.1.2 Procurement Time

Procurement time, also known as order preparation "lead time," is the total period
of time necessary to obtain a new supply of an item or to have any item replaced
that may have been unavailable due to an unforeseen variable.

6.2 Optimal Frequency

Once these factors are considered, determine the optimal frequency of measure by
evaluating the activity of the item. Assign a priority to the actual frequency of review and
measure as shown in the table on the following page. Alternatively, the actual frequency
can be inserted. The frequency should be part of the procedures manual of the
appropriate section.

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Frequency of Evaluations

Example of Item High Prioritya Moderate Priorityb Low Priorityc

Syringes X

Chemistry controls X

Creatinine reagents X

Hematology controls X

Anti-D typing sera X

RIA kits X

Blood culture plates X

Evacuated tubes X

Urine cups X

Coombs sera X

a. High priority items require constant review due to unusual requirements, use, and special orders.
b. Moderate priority items require periodic review due to use, expiration dates or storage requirements, or blanket
orders.
c. Low priority items are on standing orders and automatic reorders; or they are items whose absence would not
interrupt the work flow.

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6.3 Specific Operating Procedures

Based on active stock and safety stock requirements, and after the physical counts
are made, appropriate checklists and requisitions are used and appropriate
documentation made on a stock record for each item.

7.0 CONTROLLING INVENTORY

Effective inventory control is expected to increase efficiency by providing an uninterrupted

flow of materials needed to operate the laboratory, while reducing both quantity of inventory
and the physical space needed for its storage. Analysis of the effects on use and on storage
can be used to develop master supply lists for inventory.

7.1 Usage

7.1.1 Inventory Levels

To save space and reallocate funds for other needs, inventory should be
maintained at a minimum level. Inventory is generally measured in "weeks'
supply," or, the amount of a particular item used in a week's time. Use a
minimum of 2 and a maximum of 6 weeks' supply as an initial guideline to
establish inventory levels. Inventory level is the sum of the minimum
inventory plus safety stock.

Vendors can and should help in determining minimum and particularly

maximum inventory levels for the laboratory. If the vendor will "sign up" for
rapid shipment turnaround time (from receipt of order) and is reliable (e.g., no
or minimal backorders or delayed shipments), maximum inventory levels can
be reduced, which results in real cost savings and improved cash flow to the
customer.

7.1.1.1 Inventory Rotation

To rotate inventory, use older supplies before newer supplies.

Place new shelf items behind the older items so the older
items will be used first. Label the containers holding stores.

7.1.1.2 Minimum Inventory Level

Minimum inventory levels are the amounts necessary to

support normal operations until additional material can be
supplied, either from a vendor, an isolated storeroom, or
general storeroom.

7.1.1.3 Safety Stock

Inventory maintenance depends on many factors that the

laboratory cannot control. Lead time is the total time
between placing an order and receipt of the product in the
laboratory. Several intra-hospital departments may be
involved with order processing in addition to the
manufacturer, distributor, and shipper. Lead time is
determined through analysis of past history of supply and is a
prime consideration in setting inventory levels. Safety stock
is that amount of inventory that allows for unusual demand

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or usage plus the usual lead time for receipt of the item. In
setting safety stock, consider the product's importance in
laboratory operation.

7.1.2 Order Point

The order point is the inventory level at which the decision is made to
replenish stock. The order point is generally the minimum inventory level.

7.2 Handling/Storage

7.2.1 Receipt/Expiration Dating

Review manufacturers' expiration dates on laboratory material upon delivery

and determine the acceptability of the item. Shipments must be reviewed by
a person who has a knowledge of the product usage, so that a decision can
be made before the item is entered into inventory. To prevent the possibility
of disagreements with the vendor, it is important that the laboratory
establish an upfront understanding of expectations with regard to delivery
and expiration dates.

Arrange with the supplier a return mechanism for rejected shipments.

Advance arrangements will reduce negotiation with the supplier who must
take back material with short expiration dates. The supplier is also alerted
that dates are reviewed as products are received by the laboratory, thereby
reducing the likelihood that the supplier will ship shortly-expiring material in
the future.

Receipt-date all products (manually, with a mechanical dating device or by

automated means), upon entering them into inventory.

7.2.2 Product Changes by Manufacturer

7.2.2.1 Configuration Changes

The manufacturer/supplier should notify the user of package

configuration changes prior to shipment to allow for
appropriate adjustment for storage location and space.

7.2.2.2 Methodology Changes

To alert the user of changes in methodology, color or graphic

changes in packaging and product labeling should be used by
the manufacturer. Package inserts should clearly note the
revision date and direct the user to the specific change(s)
involved. Laboratories should have a documented protocol
for ensuring that changes to the package insert are
incorporated into the current laboratory protocol and
procedure manual.

7.2.2.3 Change Notification

Those laboratory employees who participate in the inventory

function should formally acknowledge vendor change

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notification because it may require attention by laboratory

management.

7.2.2.4 Recalls

Unsatisfactory products that must be returned to the vendor

should be announced to the laboratory directors (medical and
managerial). To avoid possible usage before return shipment
or on-site destruction, all merchandise to be sent back or
destroyed (as requested in some cases) should be
immediately isolated and appropriately marked.

7.2.3 Storage

Adequate space must be provided for inventory storage. The inventory area
may be an internal laboratory storeroom or part of a hospital general supply
area. There should be adequate space to stock inventory items and to permit
a clear view of all inventory. Unpack shipping cases and store items in the
unit by which they will be delivered to individual sections.

Certain items may fall into special categories and should be stored outside
the supply area, as appropriate.

7.2.3.1 Section Supplies

Store items that are purchased rarely, have a short shelf life,
or in small quantity for use by a single section within that
section and requisition them as needed. For example,
radioimmunoassay (RIA) kits and blood bank reagents have
short shelf lives and are probably best controlled within the
section involved. Nevertheless, apply the same basic
principles of inventory control to these items as to general
laboratory inventories.

7.2.3.2 Refrigerated Supplies

Reserve a master storage area for inventory that must be kept

under refrigeration. Back up freezers may be required in
addition to those necessary for minimum inventories (i.e.,
minimum freezer space should exceed the volume necessary
to store minimum frozen inventories).

7.2.3.3 Flammables and Hazardous Chemicals

Reserve specialized storage areas for flammable reagents and

hazardous chemicals (e.g., strong acids and bases).

7.3 Inventory Recording

Devise a system to maintain a written record of inventory levels and usage. This
record may be as complete as desired, but it should include at least the item name, a
minimum quantity that sets the order point, and a maximum quantity that sets the
order quantity. Depending on requirements, this system can be a weekly count
record, a perpetual inventory record, or a specialized inventory record. It is possible
to train clerical staff to be responsible for inventory recordkeeping.

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7.3.1 Periodic Count Record

Where strict control of inventory is not necessary, make a weekly or

biweekly count of in stock inventory and simultaneously update written
records. (See example in Appendix C.)

7.3.2 Perpetual Inventory Record

Where strict control of inventory is desired, maintain a perpetual inventory

record. Note the date and movement of individual items into and out of
inventory storage. To operate the system most efficiently, limit the number
of people who have access to inventory storage areas. Accuracy of physical
count and inventory record count is mandatory. A comparison of actual
stock on hand and the record count must be made at least annually. (See
example in Appendix D.)

7.3.3 Specialized Inventory Record

Replacement parts for instruments are a good example of a slow-moving,

limited quantity inventory that is vital to laboratory operations. Keep a record
of replacement parts showing the name; catalogue, model, and serial
numbers; and manufacturer's name and address. Provide adequate space for
recording inventory periodically (e.g., on a monthly or bimonthly basis). (See
example in Appendix E.)

8.0 ORDERING SUPPLIES

8.1 General

The manner in which inventory is ordered may vary depending on the size and
function of the laboratory and the requirements of the institution's materials
management or administrative departments. A single person may be responsible for
ordering in a small laboratory, whereas a number of persons may be more practical
in a larger, departmentalized laboratory. It is important that the laboratory have a
protocol documenting the procedure to ensure that mutual expectations between
internal "customers" (e.g., the laboratory, purchasing, and accounting) are clearly
defined.

8.2 Specifications

The basic information necessary for ordering inventory must be provided in a

thorough and explicit manner. As a minimum, include the following product
specifications:

(1) complete description;

(2) standard packaging;

(3) part number or manufacturer's number;

(4) vendor (alternative vendors should be listed if available);

(5) price breaks (i.e., standing order);

(6) unit cost;

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February 1994 GP6-A

(7) all special ordering instructions (i.e., required delivery schedule and deadline
for receipt; need for product to be of all one lot number; need for product to
have a long shelf life).

8.3 Ordering Formats

The prescribed format for a requisition will be determined by the laboratory's needs
and organization and the institution's materials management and administrative
departments. In creating any ordering system, attempt to limit the required
paperwork by consolidating several functions into one form.

8.3.1 Order Forms

In some institutional settings, the within-laboratory form is used to prepare

the institutional requisition, which is then used as the reference for the
purchase order that is sent to the manufacturer/distributor.

8.3.1.1 Inventory Control Sheet

We recommend an inventory control sheet or stock inventory

record (see example in Appendix C) because it combines the
inventory control and the laboratory ordering functions.
Regardless of the format, each list must contain all of the
information referenced in Section 8.2. Additionally, the
following information should be included: maximum/minimum
stock levels; an area to record the periodic inventory; an
area to document that a product has been ordered (including
the date and quantity ordered); and for what and where the
product is used.

Organize the stock inventory record by laboratory section,

area, instrument, and analysis. If available, it may be
appropriate to use a computer-based ordering and inventory
system to eliminate human oversight and error.

8.3.1.2 Periodic Inventory

The actual periodic inventory can be taken by whomever is

responsible for a laboratory section, area, instrument, or
analysis.

8.3.1.3 Review

The inventory control sheets are reviewed by the laboratory

supervisor and an order generated using the institution's
requisition. Regardless of the format, each requisition should
contain all the information referenced in Section 8.2.

8.3.1.4 Signal Flags

Place signal flags on lists that contain items that have been
ordered. If the items are not received within the appropriate
length of time, the signal flags will alert the laboratory and a
follow-up inquiry can be made.

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February 1994 GP6-A

8.3.2 Traveling Purchase Requisition

This requisition is well established in manufacturing firms and is useful as a

basic record to "travel" within a laboratory inventory
control-purchasing-receiving system. The card is used repeatedly to
accomplish the following objectives:

(1) initiate a requisition by the section supervisor;

(2) receive authorization;

(3) travel to the point of purchase order preparation;

(4) return to the section to await receipt from the vendor;

(5) remain in the file pending the next requisition-purchase from the
receiving file.

8.3.3 Format

The traveling purchase requisition can be either a one- or two-part form.

When a one-part form is used, the ordering information is recorded on one
side of the card and the inventory information is recorded on the opposite
side. When two cards are used, the ordering information is recorded on one
card and the inventory information is recorded on another.

9.0 INVENTORY EFFECTIVENESS REVIEW

9.1 General

A review of the products for changes that might affect the entire inventory control
program is a fundamental but sometimes overlooked aspect of laboratory inventory
control. The inventory control program must incorporate, where appropriate, an
effectiveness check mechanism to address these product changes. To assure
continued supply in the proper quantities, as well as continued proper use, early
recognition of product change is important. The following sections discuss some
product changes that can occur and that should be identified via an inventory
effectiveness check system.

9.1.1 Required Changes

Potential or required changes for the specific source of supplies and/or

changes in specific brand names. Changes in supply brand or distributor are
sometimes initiated from within the laboratory but may originate in the
purchasing department or even with the vendor.

The laboratory should let the purchasing department and the

vendor/distributor know what alternate brands are acceptable and any that
are specifically not acceptable. A vendor should not be permitted to
substitute a brand not on the list of acceptable alternatives without
consulting the laboratory.

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9.1.1.1 Investigation

Investigate changes in product source, i.e., vendors or

distributors, for impact on supply capability, delivery lead
times, differences in shipping and/or billing procedures,
availability of discounts, and availability of the proper or
required brand name product.

9.1.1.2 Evaluation

Evaluate changes in specific brand names for their impact on

availability, suitability for direct substitution, and qualification
of specific and required performance characteristics.

9.1.2 Known Changes

Any potential or known changes in product configuration, e.g., the number

of assays per unit (kit) should be routinely evaluated. The knowledge of and
record of package configuration on inventory records can be helpful should a
particular configuration be temporarily unavailable or discontinued.

9.1.3 Effectiveness Check

Effectiveness checks with respect to the supplied directions for use must
also be a part of inventory records.

9.1.3.1 Effect on Inventory

Although major changes in package inserts are usually

highlighted by the product manufacturer, the laboratory must
ascertain whether these changes affect the required inventory
supply.

9.1.3.2 Record Dates

Publication and revision dates appear on package inserts and

should be entered into inventory records.

9.2 Additional Checks

Effectiveness checks are helpful in maintaining continuity in the use and supply of
laboratory products. When this pertinent information is incorporated as part of the
inventory record, the management of inventory at the bench level is more effective
because the information is immediately available. The recognition of a change,
evaluation of its impact (including effects on patient care, laboratory safety, and
cost), and review of approval requirements to institute or accept the change will
enhance efficient inventory use.

10.0 SUMMARY

Cost containment is emphasized in basic inventory management. A good system requires

training in inventory systems and record keeping. The program need not be overly complex
or burdensome, if there is good training and careful follow-up.

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February 1994 GP6-A

An unfilled order that has aged beyond the normally expected delivery time is a danger signal
to be checked with all elements of the supply network, including purchasing, receiving,
accounts payable, and the supplier. Suppliers may sometimes hold shipments for credit
reasons that are unknown to the laboratory. In such cases, contacting the vendor
representative may result in the release of the shipment (or at least a partial shipment) while
payment negotiations proceed. Consult with your local representative and have your
payables department be proactive in telling vendors when to expect payment. The sales
representative can be invaluable in a credit problem situation. Delays may also be the result
of manufacturers experiencing unforeseen backorders in the receipt of raw materials from
their suppliers.

When productive communication exists between all groups in the supply network, the
systems should work well so that the need for, and frequency of, emergency orders is
minimal. Because the functioning of the laboratory is a critical element in health care
delivery, sound inventory control is essential.

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February 1994 GP6-A

BIBLIOGRAPHY

Blackwell RD, Chapman JF. Inventory control: A microcomputer solution to an old problem. MLO
1988;5:33-37.

Hanson LB, Weinswig MH, DeMuth JE. Accuracy and time requirements of a bar-code inventory
system for medical supplies. Am J Hosp Pharm 1988; 45:341-344.

Hossom MG. Reagent supply responsibility (letter). Pathologist 1981;35:363.

Johnson DEL. Stockless purchasing offers potential savings for hospitals. Health Care Strategic
Management 1990; 10: 2-3.

Manus C. An inventory control and money management system that works. MLO 1984; 12:63-67.

Schoen I. Reagent supply responsibility (opinion). Pathologist 1980; 34:627.

Stewart CE. A manual system for storage and inventory control of laboratory supplies. Am J Med
Tech 1977; 43(9):864-869.

Wagner M. Consignment provides alternatives to stockless. Modern Healthcare. March 17, 1989,
pp. 30-36.

Wagner M. Consignment provides alternatives to stockless. Modern Healthcare. Nov. 26, 1990, p.
42.

Weinstein W, Wenk RE. Hospital laboratory inventory management. Clin Lab Med 1985; 5(4): 753-
760.

NCCLS VOL. 14 NO. 3 18

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APPENDIX A

Basic Analysis of Items Used: Example

Section Chemistry Supervisor Jane Smith

ITEM Unit of Usage PRIORITY Delivery Where Comments

Count per in Weeks Stored
Month
H M L

Acetic acid AR pint 1 X 1 acid cabinet

Filter paper box 1 1 1 general

stores

Cuvette micro box 12 X 2 general

stores

Centrifuge tubes 15 mL bag 4 X 2 general

stores

Pipet tips #4 box 3 X 1 general

stores

Kit-Gentamicin kit 3 X 2 refrigerator

Kit-Calcium kit 1 X 1 general

stores

AMP buffer 9.0 41 1/2 X 1 general

stores

Control level 1 - box 2 X 1 freezer

unassayed

Lithium concentrate - bottle 1/2 X 2 general

150 mmol/L stores

Explanation: This analysis form is used to record all items in each section of the laboratory. In working with those managing
the program, the section supervisor reviews the usage, priority, delivery, storage, and similar factors to set up stock
inventory control records with appropriate maximum and minimum levels, as well as the traveling purchase requisition.

All items used within a section should be listed. Considerable effort is required to start a good basic inventory control
system; once established, however, the problems of supply are greatly reduced.

Because this record is used only in the start-up phase, the form can be prepared on ordinary weight paper by a standard copy
machine.

H, high.
M, medium.
L, low.

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 February 1994 GP6-A

APPENDIX A

Basic Analysis of Items Used

Section Supervisor

ITEM Unit of Usage PRIORITY Delivery Where Comments

Count per in Weeks Stored
Month
H M L

Shipping frequency

Critical inventory

Cost of shipping

NCCLS VOL. 14 NO. 3 20

 APPENDIX B

Traveling Purchase Requisition: Example

ITEM TRAVELING PURCHASE REQUISITION

Acetic acid AR grade Pint DEPT. Lab. SECTION Chem.

CATEGORY/CODE NO. SUPPLIER TELEPHONE PRICE

1. 5726 ABC Lab Supply Co. 356-7711 3.60

2. 1296 STAR Chemical Co. 295-1111 3.40

3.

Stock on Hand REQUISITIONED ORDERED RECEIVED

Approved By Quantity P.O. No. SPLR. Date Date Quantity

1 JL 2 537 #2 6/1 6/10 2

1 JL 2 683 #2 8/4 8/9 2

Usage Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. TOTAL REMARKS

19 83 1 2 1 1 2 1 1

19

Explanation: The traveling purchase requisition is used to establish and maintain accurate specifications on purchase records. A card is set up for each item.
Normally, cards are maintained by the section supervisor and are filed alphabetically by item. Each card is designed for 40 transactions using the front and
back sides. For durability, cards should be printed on 140# heavy card stock.

NCCLS VOL. 14 NO. 3 21

 APPENDIX B

Traveling Purchase Requisition

ITEM TRAVELING PURCHASE REQUISITION

DEPT. SECTION

CATEGORY/CODE NO. SUPPLIER TELEPHONE PRICE

1.

2.

3.

Stock on Hand REQUISITIONED ORDERED RECEIVED

Approved By Quantity P.O. No. SPLR. Date Date Quantity

Usage Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. TOTAL REMARKS

19

19

19

NCCLS VOL. 14 NO. 3 22

 APPENDIX C
Stock Inventory Record
QTY ON HAND QTY TO ORDER Delivery Use per Maximum/ DATE INVENTORY COUNTED
in Weeks Month Minimum
Item
5/1 6/1 7/1

Centrifuge tubes 15 mL 24/Case 2 4 8/3 4 1 5

5

Cuvette micro 2 12 30/12 18 6 22

24

Filter paper #1 12.5 1 1 4/1 3 2 1

2

Kit Calcium 1 1 3/1 2 1 2

2

Lithium concentrate 150 mmol/L 2 1/2 3/1 2 1 1

1

Explanation: This record provides an efficient means of recording inventory to be counted periodically or on a "cycle" basis. The record provides for recording 20 items with
columns to show the approximate delivery in weeks and the approximate usage per month. Using this information, one can set up a maximum and minimum inventory.

The inventory is counted and recorded. A judgement is made as to whether more stock is to be requisitioned. If additional stock is needed, the traveling purchase requisition
then activates the purchasing procedure.

This record should be printed on 140# heavy stock because it can be used for 19 counts, which, on a monthly basis, would be one and one-half years. Consideration should
be given to setting up the stock inventory record by location of storage (acid cabinet, freezer, refrigerator, general stores) and then in sequence as the items are stored.

NCCLS VOL. 14 NO. 3 23

 APPENDIX C

Stock Inventory Record

QTY ON HAND QTY TO ORDER

ITEM Delivery Use per Max./Min DATE INVENTORY COUNTED

in Weeks Month

NCCLS VOL. 14 NO. 3 24

 APPENDIX D

Perpetual Inventory Record

ITEM MAXIMUM MINIMUM

XYZ Media, Lot. A4 12 3

PERPETUAL INVENTORY RECORD

DATE IN OUT BALANCE DATE IN OUT BALANCE DATE IN OUT BALANCE DATE IN OUT BALANCE

1/8 14 0 14

1/12 3 11

1/24 4 7

2/1 5 2

2/5 12 -- 14

Explanation: The perpetual stock record is for items that must be recorded for each and every withdrawal from inventory. This provides the most accurate and strict inventory control. A typical
example is microbiological media that must be tested upon receipt before going into stock. Records include not only items but also approved lot numbers. It is recommended that the card be printed
on two sides with a banker's turn.

NCCLS VOL. 14 NO. 3 25

 APPENDIX D

Perpetual Inventory Record

ITEM MAXIMUM MINIMUM

PERPETUAL INVENTORY RECORD

DATE IN OUT BALANCE DATE IN OUT BALANCE DATE IN OUT BALANCE DATE IN OUT BALANCE

NCCLS VOL. 14 NO. 3 26

 APPENDIX E

Instrument Parts Inventory Record: Example

Cat./Model No. FA-3 Serial No. 467 Date Purchased 4/3/83

Manufacturer: XYZ Instrument Company Phone: (123) 456-7891

421 Ash Street Local Sales: Tim Smith (215) 123-4567
Anytown, NY 14567 Local Service: Jim Jones (215) 765-4321

Code Part Cost Min. Quantity on Hand at Date Counted

Number Estimate Inv.

6/1 7/1

21-203 Potassium filter 43 00 1 2 1

21-207 Sodium filter 43 00 1 2 2

21-304 Flame screen conical 8 00 2 1 3

21-312 Flame spreader 3/package 9 00 1 2 1

18-164 Ballast lamp 4 30 2 2 2

15-162 Burner ring 9 00 1 1 0

Explanation: This record of parts inventory should be kept at the instrument station and probably should be in the instrument
manual. For existing instruments, the user can set up the information and start the inventory recording program. For new
instruments being delivered, it is ideal if the manufacturer obtains a purchase order for replacement parts and sets up the
inventory record as part of the instrument maintenance manual delivered to the laboratory. It is important to show the specific
information that identifies the instrument, as well as specific ordering information by catalog number and part title. The record
provides both inventory control information, as well as purchasing information.

Min. inv., minimum inventory.

NCCLS VOL. 14 NO. 3 27

 APPENDIX E

Instrument Parts Inventory Record

Cat./Model No. Serial No. Date Purchased

Manufacturer - Phone:
Local Sales:
Local Service:

Code Part Cost Min. Quantity on Hand at Date Counted

Number Estimate Inv.

Min. inv., minimum inventory.

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February 1994 GP6-A

SUMMARY OF COMMENTS AND SUBCOMMITTEE RESPONSES

GP6-P: Inventory Control Systems for Laboratory Supplies; Proposed Guideline

General

1. The one suggestion I have for making the document more manageable for the laboratory is
to adapt them to a personal computer. The program should be written as a separate unit
with a cost accounting program (GP11-P) so that they may be tied together if the laboratory
so wishes. This would allow the test costing to be updated as new supplies are added or
procedures changed. It would also give an end-of-the-month report of the actual supplies
purchased and used per test or laboratory section. The cost per test could be compared
against a standard cost for that test.

Currently, there is no computer-based costing system for the clinical laboratory, and to try
and do the costing for even a few hundred tests manually is not practical. The numerous
forms could probably be programmed into a computerized system.

! NCCLS is planning to evaluate various options for electronic information and storage.
The Subcommittee on Inventory Control will refer this request to the Area Committee
on General Laboratory Practices for further consideration and subsequent document
development.

2. There is some concern that the title could lead some readers to expect more than what is
presented. The guidelines are for a system that is basic and manual. This should be
emphasized, or perhaps an additional section or supplement could be prepared on automated
systems using microcomputers, minicomputers, or the potential of automated ordering
systems to keep inventory levels down.

! See the response to Comment 1. The subcommittee does recommend in Section

2.2 of GP6-T that centralized control and systems for automation be considered as a
basic program objective.

3. There is no provision for handling recalled or defective products. A notification to the user,
the replacement of the product, and defined time limits should be specified according to the
importance of the product.

! As part of the revision process, Section 7.2.2.4, Recalls, was added. In addition,
Section 7.2.1 recommends that the laboratory make advance arrangements with
suppliers for returning shipments.

Section 7.1.1 and 7.1.2

4. Page 184 of the proposed standard states, "Inventory level is the sum of the minimum
inventory plus safety stock." Page 186 claims, "The order point is generally the sum of the
minimum inventory and the safety stock amount." These definitions appear to say that
inventory level equals order point.

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SUMMARY OF COMMENTS AND SUBCOMMITTEE RESPONSES (Continued)

While minimum level inventory is suggested to maintain cost effectiveness and efficiency, it
appears that one would always be at the order point. We do not believe this is the intent of
the guideline. The cost of generating requisitions must be considered when cost
effectiveness is a goal. Frequency of requisitions affects the cost. Buying larger quantities
often reduces costs.

! As part of the document revision, the definition of "order point" was revised in
Section 7.1.2 of GP6-T.

Section 7.1.1.2

5. How does the minimum inventory level definition relate to safety stock?

! The minimum inventory control = [usage/day " lead time (in days)] + safety stock.

Section 7.2.3.2

6. In this section it states, "Reserve a master storage area for inventory which must be kept
under refrigeration." This is somewhat contradictory to 7.2.3.1 which states, "Store items
purchased rarely or in small quantity for use by a single section within that section and
requisition them as needed."

! The subcommittee intends Section 7.2.3.1 to refer to unrefrigerated items with long
shelf lives, whereas Section 7.2.3.2 refers to refrigerated items.

Questionnaire

7. In response to question 6, I feel there is no justification for a manufacturer (supplier) to

backorder standing orders. It would seem acceptable if the order placed was a spot order.

! Standing orders reduce both user and vendor costs. The subcommittee agrees that
standing orders should be a supplier's priority. The unavailability of raw materials
may be a cause of backorders.

NCCLS VOL. 14 NO. 3 30

February 1994 GP6-A

RELATED NCCLS PUBLICATIONS

GP2-A2 CLINICAL LABORATORY TECHNICAL PROCEDURE MANUALS--SECOND EDITION;

Approved Guideline (1992). Offers guidelines that address the design, preparation,
maintenance, and use of technical procedure manuals in the clinical laboratory.

GP11-T COST ACCOUNTING IN THE CLINICAL LABORATORY; PROPOSED GUIDELINE

(1993). Discusses principles and techniques to help laboratory managers establish a
workable cost-accounting system.

NCCLS VOL. 14 NO. 3 31